In such cases income is calculated under the comparative value method for as long as the person owns the investments. For some investments, New Zealanders are not allowed to use the FDR method. less than 10% of the units in a foreign unit trust. Q. Will the IRD produce a booklet that could be used as a guide for those with overseas investments that clearly set out the rules of what can and cannot be done? 2) The $50,000 threshold takes into account brokerage fees if these are part of the cost of buying the shares. IR330C - choose a tax rate for your schedular payments. Dividends/income received from such investments are not directly taxable. For older data, you may have to ask your bank. Because of this, many New Zealanders invest only locally or in Grey List countries. The Tax Working Group has recommended that owners of smaller foreign-share portfolios that currently fall under those $50,000 or $100,000 caps should pay tax … Read our guide on using the NZ FIF report to see how easy it is. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments. "This is set at a maximum of 5 per cent of the investment's opening market value." The amount of tax your employer takes may not be all the tax you need to pay. Note that if you have invested less than $50,000, so that you are under the threshold, you will continue to be taxed on dividends - as well as realised gains if you are a trader - as in the past. Don't let the tax drive your decisions too much. From there you can upgrade to an NZ Expert plan to run your FIF Report, as well as other premium features including: Traders Tax Report – Calculates taxable gains for individuals who hold shares on revenue account (i.e. You will pay tax on 5 per cent of that value, unless the shares have yielded less than 5 per cent - in dividends and share price rises. Mary Holm is a columnist for the New Zealand Herald. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. A. The New Zealand stock exchange is the NZX and the Australian stock exchange is the ASX. From 1 October … # Personal investors have an exemption of $50,000 of the original cost (not current valuation) before the tax is payable. they are classified as traders by the IRD), Diversity Report – Shows how your portfolio is diversified across various groupings, at a chosen point in time, Benchmarking – enables you to select any ETF in the Sharesight database to compare against a holding or your overall portfolio, Contribution Analysis Report – Explains the drivers behind your portfolio’s performance, be they stock selection, asset allocation, or exposure to certain countries, sectors, or industries, 5 ways Sharesight helps NZ investors at tax time, How Sharesight calculates your investment performance. Investments in overseas companies and managed funds costing less than NZ$50,000 and Australian shares not included in the FIF regime will usually be treated under the normal income tax rules, when on the basis the shares were not acquired with an intention of disposal, shareholders only pay tax on dividend income they receive. Frawley adds that taxpayers affected by the new rules will still be able to claim a foreign tax credit for the foreign withholding tax deducted from their gross dividends. This is monthly data, and strictly speaking taxpayers are supposed to establish the exchange rate on the day they bought the shares. # If tax due is accrued is it still to be wiped upon death? It's irrelevant what happens to their value after purchase. For other cases, … In effect, then, part of the tax will sort of be on capital gains. If this is you, Sharesies can’t handle your tax for you and you should seek tax advice. However, what will happen on April 1, 2008? I think Frawley is politely trying to tell you the new rules will be easier than the old ones, so what are you moaning about! Frawley also points out that under the current law "people are still taxed on their dividends even if their shares go down in value, resulting in a net loss for the year. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. at no cost to us. In answer to your first question, "under the new fair dividend rate method dividends are not taxed separately and therefore do not need to be included in a person's tax return," says the IRD's Peter Frawley. And that means, says Frawley, "it is not appropriate to recognise capital losses". To get started, simply sign up for a FREE Sharesight account and add your holdings. Any method which involves carrying forward amounts (whether gains in excess of 5 per cent or tax losses) would be much more complex than the new method." A. On currency changes, the situation is the same, really. # Will investors now have to give a statement of assets each year to the IRD? The idea is to be able to recognise certain franking credits for New Zealand tax purposes. Most New Zealand based fund managers have converted their retail funds into PIE funds. Perhaps you could answer a few points for your readers e.g. Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. The rules apply when less than 10% of the shares in a foreign company are held, or units of less than 10% in an overseas unit trust. "It is an inherent feature of the new method that no losses are carried forward as each year is treated separately. the other country or territory has deducted tax. Unfortunately, in your case that means that your shares don't qualify for the threshold. And, knowing that people are thinking of using this strategy, I wouldn't be surprised if Inland Revenue takes particular interest in share trading over the next few months. Still, I don't know your circumstances, and it may make good sense for you. Probably the latter. In that case, then, you will receive those dividends tax-free - putting you at an advantage, in those years, over people not affected by the new tax rules. If you have a job to come to, it is a good idea to open an account before you get here. "Any transaction that is done for the purpose of reducing tax could trigger the general anti-avoidance provisions in the Income Tax Act," says Peter Frawley. If I may ask one more thing, if the value of one's overseas investment fluctuates wildly due purely to currency changes (which is a big risk for the $) will we be taxed on the gain but not be able to claim the losses? # The $50,000 applies separately to each investor. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. zero)? The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. If you do sell and then repurchase your shares, under the new fair-dividend-rate rules shares bought during a tax year, and dividends on those shares, aren't taxed, says Frawley. Your exemption lasts for up to 4 years and means you do not pay PIR on income that you get from foreign investments as long as: the income from them is made outside New Zealand "For those that have a buy and hold approach [i.e., they do not buy and sell shares in the same year] the new rules are relatively simple to apply." He adds that "it has been a requirement for many years with the current Grey List exemption for a person to know whether the companies they invest in are resident in Grey List countries (Australia, United Kingdom, Germany, Norway, Spain, United States, Canada and Japan)". New Zealand tax law treats the estate of a deceased person as a trust. I must admit that sounds like a fair amount of hassle to me. Go to www.rbnz.govt.nz/statistics/, click on "Exchange rates" on the left side, and then on "B1 historical series". Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? "This will be followed by further help, including a booklet and an online calculator which will calculate the answers investors can put in their tax returns from the data they input," says the department. Mary Holm is a seminar presenter, author and publisher. 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? Yes. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. A. For the purposes of calculating the cost of these shares, would they be valued at zero (what we paid) or the market price of the shares? By the way, you won't have to prove each year that your shares cost less than $50,000. i.e. Sorry for bombarding thee. There will be market-crash years when we are glad we are in the new regime rather than the current one. But how are dividends on shares purchased during the year treated? Find out whether you need to pay UK tax on foreign income - residence and ‘non-dom’ status, tax returns, claiming relief if you’re taxed twice (including certificates of residence) If you hold overseas shares (excluding Australian-listed companies) that cost more than $50,000 NZD in total, then you may be obliged to follow FIF (Foreign Investment Fund) tax rules with the IRD. As Frawley points out, when you calculate the tax, it will be based on the current market value. I will include more in the next few weeks. This will certainly help some people. "A person may choose to treat shares acquired before 2000 as costing half their market value on 1 April 2007 for the purpose of the $50,000 threshold," says Frawley. They are all taxed under the new rules, as are New Zealanders' investments in UK investment trusts listed in New Zealand. I hope many readers whose letters won't make it into the column can find answers there. Pre-register here! For NZ tax purposes I have always shown these dividends in my annual tax return. employers navigate New Zealand’s tax and employment related matters; we provide advice about tax planning opportunities, management of assignment policies and the provision of New Zealand tax filing services. Is it still April 1, 2007, i.e. My answer - not Peter Frawley's - is that if your international share holding originally cost, say, $50,000 to $70,000, and you have no plans to buy any more international shares, it would probably be a good idea to sell down to below $50,000. What happens if a married couple each are close to this exemption level and one dies, leaving their assets to the survivor (trusts and estates have no exemption)? PIR: Prescribed Investor Tax Rate. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. A. It's a swings and roundabouts thing. You'll need to pay tax on your overseas income even if: you do not bring it into New Zealand. Murray Brewer Partner, Tax D +64 9 922 1386 M +64 27 448 8880 E murray.brewer@nz.gt.com Greg Thompson Partner and National Director, Tax In that case, you will pay tax on the yield amount. It also covers managed funds held overseas and … 4) Would you recommend a couple to sell down to $99,999 at purchase price in order to avoid the considerable problems of proving each year that shares purchased perhaps 40 years ago were indeed purchased at a seemingly low price? It also covers managed funds held overseas and … One is www.oanda.com/convert/classic, which goes back to January 1990. Explanations of changes to legislation including Acts, general and remedial amendments, and Orders in Council. Tax Technical - Inland Revenue NZ. If that is the case, you will be subject to tax only on overseas income or gains remitted to the UK. Thanks very much. Does this investment strategy make sense for the first year, or is it too good to be true? 4) In light of what we've said above, let's change this to "Would you recommend that a person sell down to $49,999." They don't apply to overseas property, bonds or cash. A. * * * New Zealand's capital gains tax applies only if you hold shares in companies not based in New Zealand or the Grey List countries, which are Australia, Canada, Germany, Japan, Norway, Spain, the UK or US, says Pippos. Also Rinker's main business is in the United States, but is it resident in Australia? Those people will have to list their relevant overseas share investments. # Include the dividend as usual and not enter it in the value of the shares, or Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. These investments are usually called FDR prohibited or CV enforced investments. And over the years, there'll be ups and downs. # Under the earlier version of the tax bill, taxes could be carried forward into future years. By the way, if you sell and then buy back less than $50,000 worth, you would be under the $50,000 threshold. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. When the deceased person was not resident in New Zealand at the time of death, the estate is classified as a foreign trust. In general, there are two methods in which you pay tax on your investments. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. "The new fair dividend rate method seeks to tax an amount approximating a reasonable dividend yield on a person's investment each year," he says. If one spouse dies and leaves their assets to the survivor, and that causes the survivor's portfolio to exceed the $50,000 limit, the surviving spouse will then be subject to the new rules. As the new tax regime on shares in countries beyond Australasia takes effect, many taxpayers seem to think it's tougher than it really is. listed on the Australian Securities Exchange (ASX), qualify for the exemption from the FIF rules on its website, a FIF superannuation interest (from 1 April 2014). February 3, 2007 Q. I have some questions regarding the $50,000 exemption with respect to the new overseas tax legislation: You are also liable for tax in New Zealand, on any dividends from your overseas holdings. The Reserve Bank holds monthly NZ dollar exchange rates for the US dollar, British pound, Australian dollar, Japanese yen, and Germany's deutschmark, going back to January 1985. Q. FIF-Exempt Overseas Income & Overseas Tax Credits Content also available for tax entities or on our global site.. There's some compensation, though. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. Frawley says you won't have to go to much trouble to pay the tax. between 10% and 40% of the shares in a foreign company which is not a CFC. Simply the best portfolio management tool for DIY investors. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. On your first question, that's one way of looking at it. In the reader's example the reinvested dividends will be picked up in the opening market value of the shares each year." # Does "overseas investment", i.e. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). Over the past 12 months Mary Holm has dealt with a mountain of correspondence on the tax changes on foreign shares in her regular Weekend Herald column, Money Matters. # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. How does one calculate the conversion to NZ dollars? The rules apply when less than 10 percent of the shares in a foreign company are held, or units of less than 10 percent in an overseas unit trust. Individuals will pay tax, at their personal tax rate, on the lower of: The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. So you would be taxed under the current regime, which means your dividends would all be taxed. For a start, if you hold your international shares directly - as opposed to in a managed fund - and they cost less than $50,000 when purchased, you are exempt. That would save you some tax and some hassle. The dumb people are those who don't ask. Overseas pension income (see our separate guidance on this); Other overseas investment income, for example, dividends on shares in overseas companies. a New Zealand tax resident, or where the individual has previously returned income of the superannuation scheme under the FIF regime and elects to continue to do so. Q. # 5 per cent of the market value of their shares at the start of the tax year, or: Yours is one of many questions I've received about the tax changes. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. While no general capital gains tax applies in New Zealand, tax on gains made may apply to NZ investors trading shares when: They purchase a property with the intention to sell it (this rule was introduced in 2016) They purchase shares or other investments with the intention to sell it at a profit (rather than hold the shares and earn income from holding them) In these … If you get interest and dividends from overseas, there are different rules depending on your situation. Sorry if this is a dumb question, but I would like an answer. The FIF-Exempt Overseas Income & Overseas Tax Credits page is part of the FIF Report available within Sharesight.It provides a taxable income summary for Australian shares that are excluded from the FIF tax regime. Overseas investments include: pension schemes. However, help is at hand. As it may not be readily apparent that an Australian listed company is not an Australian resident, is Inland Revenue going to provide such a schedule on its website, which will ensure that taxpayers can comply with the new legislation. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? Let's say a person with several US shares and a portfolio worth over the $50,000 threshold has several of these stocks placed in company dividend reinvestment programmes. # Drop it from the dividend declaration and have it included in the value of the shares? In contrast, a non-resident is taxable only on New Zealand-sourced income. Under the new fair dividend rate method no tax would be payable in such an income year." Some searching questions, answered here by Peter Frawley of Inland Revenue: 1) The $50,000 is a threshold. This is your personal tax rate. My holdings would come under $50,000 on purchase. In many cases, Resident Withholding Tax (RWT) or PIE tax is automatically deducted from you at a certain point in time, like when the income is paid – in the same way PAYE tax is deducted from your salary or wages. However, investors in these funds won't have to deal with the new taxes on their tax returns. They facilitate international tax compliance in accordance with New Zealand tax law. Multinational Enterprises - Compliance Focus 2019 (PDF 941KB) Download guide Compliance focus documents from previous years. shares in foreign companies (like what you buy on Hatch) rental properties in another country (not included in FIF rules) bank accounts (not included in FIF rules) If you’re a tax resident outside New … The RBNZ also holds monthly NZ dollar/US dollar data going back to 1970, used in the calculation of the trade-weighted index. Some good practical questions, which David Carrigan of Inland Revenue has answered as follows: If you are a resident, but non-domiciled, the amount of UK tax you have to pay on foreign income and gains may sometimes depend on whether or not you bring money or assets into the UK. Q. I have a portfolio of UK shares over the $50,000 threshold and therefore due to fall prey to the new foreign investment wealth tax. This is then converted to a certain number of shares, which are added to the base shareholding. A. To make things easier for those working out their eligibility for the threshold, Inland Revenue has come up with a compromise. Tax for New Zealand tax residents. "If the investor is an individual or family trust and the total return (dividends and capital gains) on their portfolio of directly held shares is less than 5 per cent, then tax is paid on the lower amount." So it isn't all bad. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. A. * * * 1) Is this a $50,000 exemption or a $50,000 threshold? But if you do buy more shares, you need to add the cost of those purchases to the original costs of your current holdings. Regardless of tax, any investor in overseas shares needs to learn to ride those waves. And I don't think the new tax rules are harsh enough to warrant most people getting out of international shares. However, with the new system due to be implemented this year, what does one do? The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. This may seem a trivial question, but it becomes important if the $50,000 is a threshold rather than an exemption and one is close to the $50,000 limit. As the original investment is over the $50,000 threshold, will I be hit again with this new tax or can I have the shares revalued at their market value on April 1, 2007 - which presumably will be well under the threshold unless there is a miracle between now and April 1 - and then be outside the new tax regime? Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. The authority has ruled that the man's family links and some property investments he kept in New Zealand counted against him. You buy and sell shares through a stock broker To buy and sell shares on the stock exchange (called ‘trading’) you’ll need to place an order through a stock broker – this is a company licensed to … That's a pity that you're planning to reduce your portfolio. For example: A woman owns shares costing $40,000 and her husband owns shares costing $5000. Richard Prebble: China has silenced New Zealand, NZ regulator issues Bitcoin warning: Be prepared to lose all your money, It's mother vs. son in Britain's priciest divorce war, 'It's desperate down there': West Coast town hanging on for Govt help, Police seek skipper and yacht last seen in the Marlborough Sounds. By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. Her website is www.maryholm.com. But the man's total, $5000 plus $15,000, keeps him under the threshold. Nevertheless, strictly speaking the new tax is not a capital gains tax. As a New Zealand tax resident, you pay tax on the total income you receive from all your investments, whether they're in NZ, the US, or elsewhere. A. However, the exemption will apply for a limited period to trusts created on a person's death, so that trustees have sufficient time to deal with the deceased's estate under the will." Key features of New Zealand’s tax system include: 1. no inheritance tax 2. no general capital gains tax, although it can apply to some specific investments 3. no local or state taxes, apart from property rates levied by local councils and authorities 4. no payroll tax 5. no social security tax 6. no healthcare tax, apart from a very low levy for New Zealand’s Accident Compensation injury insurance scheme (ACC). And that would be a sure-fire way of boring most readers witless. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. March 10, 2007 Q. I follow your columns on taxing of overseas shares because I have shares and unit trust investments in Canada. Overseas share investments by New Zealand-based international share funds, such as WiNZ, will also be subject to the new rules. "The new rules have been designed to minimise investors' compliance costs," he says. 2001 New Zealand Master Tax Guide, 26-185. 3) For a couple to qualify for a total $100,000 threshold, half the shares would have to be held in each spouse's name. The $50,000 threshold is based on the original cost of offshore shares. Some not-so-good news from Frawley: "The person in this example is treated, for the purposes of the $50,000 threshold, as having acquired the shares for their market value at the time they received the shares under their employee incentive scheme." But it might be pretty hard to argue that you had any other purpose. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. Q. If they are paying no tax that year on their offshore shares, because they have made a loss, the credit will reduce payment of tax on other income. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. That means that if the cost of your overseas shares is $51,000, all of those shares are subject to the new rules. Haddon said he was not convinced the proposals were good for 'New Zealand inc'. March 24, 2007 Q. Inland Revenue has recently published two papers clarifying a lot of the issues people are asking about. Dividends/income received from such investments are not directly taxable. if you have $51,000 at purchase price, is $1,000 in the new system and subject to the tax and $50,000 exempt and taxable on income only, or is all $51,000 now included? You will simply be asked if they cost more than that, in which case you will pay the tax. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. Or do the shares have to be held specifically 50/50 in each individual name? You don't have to do any more calculations in subsequent years. Go to www.taxpolicy.ird.govt.nz, and scroll down the homepage to February 23, "More on offshore investment changes". # Are all companies listed on the Australian stock exchange exempt or are some still caught by the tax rules, as are UK investment trusts listed on the NZ stock exchange? If the couple has some shares owned jointly, and some owned individually, each person would have to add half the cost of the jointly owned shares to their individual total. This is an annual tax on the rise in value of your holdings, not a tax on the sale. From reading the answers you got from Peter Frawley, I understand that the $50,000 threshold operates on the original cost of purchasing the shares. Tax for non-resident taxpayers. beyond Australia, mean just shares or does it include assets like property, bonds and cash? A. You should use the exchange rate on the date of purchase. A. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. January 13, 2007 Q. I have a portfolio of shares directly invested in overseas companies. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. Taxable gains on shares in New Zealand. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. This is an annual tax on the rise in value of your holdings, not a tax on the sale. My holdings will probably then be well over $50,000 (I've had them a long time). The $50,000 threshold. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. February 10, 2007 Q. I refer to the recent reply regarding the new overseas tax legislation from Inland Revenue, which stated that the Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange.

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